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At Ford, The More Brands, The Merrier

April 02, 2000

International Business: Autos

At Ford, the More Brands, the Merrier

The trick is to keep them from sideswiping one another

Chalk up one more savvy acquisition for Jac Nasser. Since creating Premier Automotive Group last spring to oversee Ford Motor Co.'s luxury brands, the dynamic chief executive has been busily stocking the portfolio with upscale names. Volvo joined Jaguar, Aston Martin, and Lincoln last March. Now, Ford's $2.9 billion purchase of Land Rover from BMW brings another premium marque into the fold. "This is good stuff," says Wilmington (Del.) auto dealer Frank Ursomarso, who owns Jaguar and Volvo franchises.

What Nasser has amassed--and last year hired former BMW hotshot Wolfgang Reitzle to run--is an elite stable of brands unlike anything else in the auto business. For luxury carmakers such as Mercedes, BMW, and Lexus, growth means adding smaller cars and bigger SUVS to their lineups. Not at Ford. "You could always choose to go with one brand and stretch it," Reitzle told BUSINESS WEEK last fall. "We'd rather use different brands."

Going that route requires Reitzle to integrate acquisitions into Ford's portfolio. He must tune up Land Rover by cutting its costs. That means sharing parts and expertise with other Ford brands--all without losing the brand's distinctive, rugged image. And he must move quickly because Land Rover's profits are already under pressure in the increasingly crowded SUV market.HEMMED IN. Reitzle's most difficult challenge, however, could be expanding sales for Land Rover and the rest of Ford's upscale brands without letting them drive all over each other's territory. He'd already vowed to increase the premium group's sales from last year's 665,000 units to one million by 2004, and is expected to raise that goal higher once Land Rover joins the pack. "It's too crowded for individual makes to grow," says Susan Jacobs, a Rutherford (N.J.) luxury-car consultant. "If one brand starts to add new models, it can't--because it would step on somebody else's toes."

Lincoln appears most hemmed in. Ford's largest luxury brand has added the Navigator SUV and LS entry-luxury sedan to attract younger, well-heeled buyers. Those models helped boost 1999 sales to 176,500 vehicles, up 17% in five years. Ford was eyeing a smaller luxury SUV, based on its mass-market Explorer, as a way to extend Lincoln's appeal. Now, analysts speculate that Ford might drop those plans, because such a model would compete head-on with Land Rover's Discovery.

For Land Rover to pay off, Ford will have to do more than pool procurement of Land Rover's $2 billion in parts purchasing with Ford's $80 billion program. Ford engineers will also swoop into Land Rover's Solihull (Britain) factory to boost efficiency and quality. Last year, Land Rover ranked a poor 26th in J.D. Power & Associates' initial quality ratings. Fortunately, Ford learned how to fix such problems after the 1989 acquisition of Jaguar. "They know how to do this," says Merrill Lynch & Co. analyst John Casesa. "Jaguar was ten times as bad."

The biggest savings could come further down the road. Ford is expected to share key components--chassis, engines, four-wheel-drive systems--of future Land Rovers with upcoming Fords, Lincolns, and Volvos. For instance, the next-generation Freelander, Land Rover's smallest truck, might be built from the same platform as Ford Div.'s Escape and Mazda's Tribute. Says Lincoln C. Merrihew, auto analyst at Standard & Poor's DRI: "The economies of scale could be tremendous."

Such opportunities are what keep Nasser out scouting for more deals. Ford is among the carmakers dickering to buy Daewoo. And Nasser would love to get his hands on BMW if it comes up for sale. Assimilating new acquisitions will only grow trickier as the company's stable of brands becomes more crowded. But for Ford's shop-till-you-drop chief executive, the chance to add a few more nameplates to his collection may prove irresistible.By Kathleen Kerwin in DetroitReturn to top